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Former President of National Graduate School Sued by AG’s Office for Excessive Compensation and Lavish Spending without Board Approval

School and its Board of Directors Agree to Change in Leadership, Regular Reporting; AG Coakley Alleges Dr. Robert Gee and Board of Directors Breached their Fiduciary Duty to Non-Profit School

BOSTON — The former president and CEO of the National Graduate School For Quality Management, Inc., in Falmouth, has been sued for breaching his fiduciary duty to the institution by collecting excessive compensation and other benefits from the school, Attorney General Martha Coakley announced today. The school and its board of directors have also entered into an agreement with the AG’s Office that requires a change in leadership and imposes regular reporting requirements.

The AG’s Office filed a lawsuit Tuesday in Suffolk Superior Court against Dr. Robert Gee, the former president of the Falmouth-based non-profit educational institution, the National Graduate School of Quality Management, Inc. (NGS).

“We allege that Gee has continually abused his position as the head of this non-profit organization by collecting an exorbitant salary for years, as well as receiving other lavish perks totaling millions of dollars,” AG Coakley said. “This extreme breach of trust has been detrimental to the school, whose financial stability has been significantly damaged.”

NGS provides degree programs in quality systems management and business administration and has an annual national enrollment of a few hundred students. In Massachusetts, NGS is licensed only to grant Masters of Science in Quality Systems Management (MSQSM), but it also offers online programming and some in-person programs in other states, including Florida, Virginia, Texas, and California.

LAWSUIT AGAINST DR. ROBERT GEE:

In the lawsuit against Gee, the AG’s Office alleges that he breached his fiduciary duty to NGS by orchestrating several arrangements with the school that granted him excessive compensation and awarded him other unjustified benefits, including a vacation property, a private residence, and several personal luxury vehicles.

According to the complaint, Gee arranged two separate compensation agreements with NGS in 2003 and 2006 that resulted in his receiving a level of compensation that was not comparable with those of his peers nor was it reasonable given the size, assets or complexity of the institution. For example, in 2008, Gee’s total compensation was more than $700,000. The complaint alleges that the agreements were created and executed without the knowledge or approval of NGS’s Board of Directors.

In another example, Gee received a $100,000 bonus in 2009 for his “superior job performance” according to meeting minutes of the Board’s Executive Committee. The AG’s investigation determined that no meeting or vote ever took place, and the complaint alleges that Gee created the false meeting minutes himself.

The lawsuit further alleges that Gee purchased luxury automobiles in 2004 and 2009 for himself and his then wife and a timeshare on a Caribbean island for his personal use. Gee also allegedly directed NGS to purchase more than $4 million in property in an exclusive neighborhood in Falmouth to be used in part as a residence for Gee and his then wife. Those properties were located on Onawa Lane and 53 Quonset Road.

All of those purchases were allegedly made using NGS funds and without the knowledge or informed approval of the board of directors. According to the lawsuit, both Gee’s excessive compensation and the lavish benefits that he conferred upon himself have caused significant damage to the financial stability of NGS.

The AG’s lawsuit seeks to have Gee return the excess compensation he received to NGS and reimburse the school for the money he used to make purchases for his own personal benefit. The lawsuit also seeks to prohibit Gee from serving in any position of authority in any other Massachusetts public charity. Gee was terminated from all employment at NGS in September 2012.

SETTLEMENT WITH BOARD OF DIRECTORS:

In a separate but related action, NGS has entered into an agreement to create a new board of directors with strict reporting requirements and monitoring by the AG’s office. Failure to abide by the terms of the agreement will result in the dissolution of the charity.

“The directors breached their fiduciary duty by failing to implement an internal process to oversee and approve Gee’s compensation and other benefits,” said AG Coakley. “Through this agreement, the school will be forced to create an entirely new board of directors and will be subject to very strict reporting requirements.”

After a lengthy investigation, the AG’s Office concluded that Gee’s actions and continued extravagant spending on personal items using charitable funds was in part due to the negligence and lack of accountability by the board of directors. The AG’s Office contends that this was a breach of the board members’ fiduciary duties to NGS. The investigation also uncovered past instances of misleading and inaccurate advertising by the school.

As part of the agreement, also filed Tuesday in Suffolk Superior Court, NGS’s board of directors has agreed to completely reconstitute itself and bring on an entirely new board, to be approved by the AG’s Office, by August 1. The board of directors has also agreed that NGS must have a balanced budget every quarter through the third quarter of FY14 and provide quarterly financial statements to the AG’s Office. If these leadership and financial reporting requirements are not met, the board has agreed to begin the process of dissolving NGS. The school also agreed that it will not engage in any deceptive advertising or misrepresent the nature of its educational programs.

This matter is being handled by Assistant Attorneys General Ashley Wisneski and Nora Mann of AG Coakley’s Non-Profit Organizations/Public Charities Division, and Assistant Attorneys General Jenny Wojewoda and Peter Leight of AG Coakley’s Insurance and Financial Services Division.